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Taxes and energy bills to rise by £1,900 despite inflation drop – ‘things will get worse'

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The Resolution Foundation is sounding the alarm that the cost of living crisis “will get worse before it gets better” in the New Year. This is despite inflation showing signs of easing having reached a peak of 11.1 percent in October and dropping to 10.7 in November. Notably, energy bills are expected to rise by £900 to £2,450 for the average household and personal taxes will go up by £1,000, according to the think tank.

Warnings of further economic turmoil come despite vacancies falling by nine percent in the last six months.

Short-term unemployment and redundancies are currently on the rise with the latter reaching 100,000 per three months to pre-pandemic levels.

Incomes are also expected to drop by 3.8 percent which is a larger pay cut for households than in 2022.

This is despite the National Living Wage and benefit payments being set to receive a sizable boost later next year.

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A survey of 10,470 adults commissioned by the Resolution Foundation found that Britons are over four times as likely to believe their financial situation has become worse rather than have improved in the last 12 months.

On top of this, low-income families are three times as likely compared to high income households to not feel as confident about their financial situation in the coming quarter.

Wages in the UK are forecast to drop in real terms until the second half of 2023 and may not return to their current level until the following year.

As well as this, the Government has rolled back energy bill support at a time when costs are to jump by £900 to £2,450 next year, up from £1,550 in 2022, and £1,170 in 2019.

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At the same time, tax increases will continue with middle-income households likely to pay around an extra £1,000 from April.

The vast majority of tax hikes are expected to hit higher-income families, those on a middle-income bracket will see more of their income impacted than the richest five percent of households.

Furthermore, mortgage payments are estimated to increase by £3,000 for the average household next year.

Within the last 12 months, the Bank of England has raised the nation’s base rate nine consecutive times in a bid to control inflation.

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Mortgage and debt payments have risen as a result with the base rate currently sitting at 3.5 percent with further increases likely.

Torsten Bell, the chief executive of the Resolution Foundation, referred to 2023 as a “groundhog” year when it comes to the continuing economic downturn.

He explained: “From a cost-of-living perspective, 2022 was a truly horrendous year – far worse than any year in the pandemic or financial crisis.

“2023 should see the back of double-digit inflation, but it looks set to be a groundhog year for many families whose incomes look set to fall by just as much as they did in 2022.

“Many families will be helped by benefits and the National Living Wage rising, both by around 10 percent next April.”

The finance expert broke down the numbers and outlined why families should before for the situation to get “far worse”.

Mr Bell added: “But this will be swamped by shrinking pay packets, a record £900 rise in energy bills, tax bills for the typical household rising by £1,000, and millions seeing four digit increases in their mortgage bills.

“For families’ living standards, things will get far worse in 2023 before they start to get better.”



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